Designed to last

Architects, with the time they are suddenly finding on their hands as the crisis takes its toll, are turning to drawing up designs for tenders. But isn’t this merely making a virtue out of necessity?

Zuzanna Wiak, Emil Górecki, Mladen Petrov

A few weeks ago, the Dutch newspaper ‘Algemeen Dagblad’ wrote about the bankruptcy of the Rotterdam-based Eric van Egeraat studio, which had branches in Budapest, Moscow and Prague. Just before the bankruptcy was filed, the studio withdrew from preparing a design for the artificial Federation Island, a multi-purpose complex in the shape of Russia, which was supposed to be built in Sochi for the 2014 Olympics. “The financial crisis is having a big impact on the construction industry and that means on architects too,” comments Izabela Klimaszewska, vice-chairperson of the National Council of the Chamber of Architects in Poland.

Bleak prospects

The architectural studios involved in residential design are the most severely affected by the slump in the Polish market. But attempting to diversify into other sectors may also prove difficult. “Investors are not willing to order office designs from studios that are inexperienced in this type of design,” claims Ewa Kawulok-Matkowska, the managing director of the Ozone Architectural Studio.

It is not only architects working for residential developers who could find themselves in serious difficulties. “The financial crisis will change the way many studios function: it will disrupt their financial liquidity and lead to bankruptcy for some. But we believe that this period will act as a much needed check on the architectural market. The best ones will survive the crisis, which doesn’t necessarily mean they are the cheapest or the biggest studios. Let’s hope that developers will not only be judging designs in virtue of the fee,” says Izabela Klimaszewska. The Polish architectural profession is anticipating both the bankruptcies of smaller studios as well as limited employment of new staff in 2009. Architects who during the economic boom emigrated to Ireland and Spain are now coming back home to find a difficult market. “Even the most experienced architects working abroad may have problems finding a new job when they return home – not only due to the crisis, but primarily because of a lack of experience in Poland,” adds Ewa Kawulok-Matkowska.

Despite the fact that more and more architectural studios are dismissing employees, new companies can be expected to enter the market at some point. In order to survive, Spanish and British architectural studios will be moving their activities to countries less affected by the crisis. Such studios will be opening in Poland, Bulgaria, Hungary, Ukraine and the Balkans; they will bring their own clients who are planning to invest in this region of Europe, where the market is stronger. Because the fees are negotiated individually in architectural studios, it is hard to say whether new companies on the Polish market will be more competitive in terms of pricing in comparison with existing ones. “Foreign architectural studios are not necessarily a threat to local Polish ones. Nevertheless, many investors requiring more spectacular designs express the desire that an international star should be brought in for the design work. But it should be expected that developers nowadays will more and more frequently be unable to afford world famous architects,” predicts Izabela Klimaszewska.

Rescue from the public sector?

An increasing number of architectural studios are in trouble and need to look for alternative sources of commissions. “The number of public projects is growing. According to architects, there is also more care being taken over whether new developments blend in with the cityscape and create a spatial-architectural order together with the essential infrastructure,” claims Izabela Klimaszewska.

The Ozone studio has also decided to take on public contracts and participate in tenders. “We have less work nowadays, but thanks to that we can devote ourselves to tenders and public contracts. They are less lucrative contracts, but nevertheless a steady source of income. Furthermore, we also get a chance to be active in a new area of the market. There are two such projects we are currently undertaking. The first one is the extension of the Museum of History in Legionowo outside Warsaw and the second one is a design of the integrated interchange station for Euro 2012 at the new Wrocław stadium,” explains Ewa Kawulok-Matkowska.

Buildings without foundations

Everyday we hear about the need to make savings and improve efficiency. Does this also extend to architects and their work? Certainly some investors will ask designers to change architectural concepts so that they are less expensive to build. Cost cutting by an investor has its advantages. “Perhaps the financial crisis will have a positive influence on the construction industry. It will encourage investors to pay more attention to energy saving solutions and functionality, which will naturally bring about operational costs reduction. However, the costs of environmentally friendly materials are, unfortunately, relatively high, discouraging investors, especially these days,” remarks the vice-chairperson of the National Council of the Chamber of Architects.

Western prices, eastern standards

The real estate markets of Russia and the Ukraine, especially in the larger cities, are similar. They started to develop in a rather dynamic fashion and attract speculators at more or less the same time. Large and aggressive architectural studios started to spring up and develop in an impressive manner. Now however, they have become the first victims of the crisis in the real estate market. “Until recently, the big architectural studios in Moscow and Kyiv had a glut of contracts and demanded fees comparable with those of well-known Western studios, which is why weaker architects also had a chance to work, as they offered a much lower standard of service. The development of the real estate market and of architectural services, did not go together with the development of the economy. At the moment, 80-90 pct of studios have nothing to do and the activity of developers is close to zero. Architects are only occupied with design supervision of buildings under construction or in finishing earlier contracts,” relates Oleg Drozdov, head of Drozdov & Partners in Kharkiv, a studio operating mainly in Russia and Ukraine.

Are developers now opting to save money on architecture? Oleg Drozdov answers the question with a wry smile. “There are no new contracts at all and I haven’t heard about any studio in Ukraine or Russia securing new clients,” he reveals. His company is already prepared for the bleaker times ahead and unfortunately, they have already had to dismiss some of their staff. There were 43 people working for them in the early autumn, but now there are only 25. However, he assures us that there will be no further dismissals. “Half of my team are working on current contracts, the second half are preparing designs for international tenders. One half is making money; the other half is spending money. This is a good policy because people are the most important capital in architecture. Right now we are mostly dealing with redesigning earlier projects so that they can be utilized more effectively. We managed to win several such contracts a few months ago. Even if our employers do not pay us on time, we are able to stay afloat for about two years until the economic situation improves,” claims Mr Drozdov.

The small are not the weak

“Large state design institutes and architectural studios have nothing to do at the moment,” reveals Yevgeniy Kolesov, business manager of the Russian International Association of Architects’ Union and the owner of a private architectural studio in Moscow. According to him, a significant majority of such companies are simply not securing any new contracts, and if they haven’t started dismissing their employees yet, they will soon start to do so. The only exceptions are studios preparing designs for the 2014 Olympics in Sochi, although the state is also making cuts for this event. Small and medium sized studios are in a relatively healthier situation, as they can be more flexible in the services they provide.

“Have any studios already gone bankrupt? Nobody is talking about it at this point, but it is possible. On the other hand, there is a clear trend towards lower margins,” feels Mr Kolesov. This situation is expected to last until the market gets over the slump. Yevgeniy Kolesov does admit that “the payments we receive for every design made in my company is 20-50 pct lower than before the summer holidays. So I will have to cut my employees’ wages in the same way.”

An unfortunate coincidence

Architects from Bulgaria also have little reason for optimism. The global financial crisis brought about the collapse of the construction market, which leaves developers and their consultants extremely concerned. “I believe that everything we are witnessing right now will have a positive influence on the architectural sector. When clients are demanding better quality apartments, due the enormous supply, developers will look to their architects to produce higher quality designs. This will benefit the architectural studios, in particular the ones that did not grab each and every job during the boom and are now being associated with their less ambitious designs,” argues Miryana Krasteva from Sofia Skica Studio.

Until fairly recently, quality was pushed to the background. However, changes can already be observed, which pleases Plamen Bratkow, an architect with the Aedes Studio in Sofia. “In times of prosperity, one of our clients continually enlarged the design, which in its final shape was far from the original idea. However, the crisis made us return to the earlier idea of a light and elegant building. This is good news for me,” says Plamen Bratkov. The Aedes Studio is currently working on a few new, smaller residential projects and a hotel.

Contrary to the fears of some in the industry, there are still new contracts to be won for residential building designs, apart from those in seaside and winter resort locations, which have experienced a significant slump in interest from foreign investors.

The importance of a reputation

Architects confirm that there has been a noticeable drop in the number of contracts, which is also connected with the reduction of employment creation. Who will cope the best in the current situation? In Plamen Bratkov’s opinion, the biggest studios will have more difficulties with adjusting to the new conditions as they have become accustomed to having large numbers of commissions. Opinions differ however. “Big studios and those with foreign relations and capital will undoubtedly have more contracts that will bear fruit in the future. Developers do not want to take risks nowadays and commission a company ‘without a name’,” declares Miryana Krasteva. The studios in regional cities will be in an even more difficult situation, studios that previously did not complain about a lack of work, but even at the best of times suffered when international developers preferred architects from Sofia.

The state probably won’t help

Architects admit that so far developers have not exploited the market situation and pushed for lower fees. The Chamber of Architects in Bulgaria established minimum rates for architectural studios in 2004, which amounted to 50 pct of the rates in Germany. These have not been changed since they were set, but some developers have started questioning the level of payments. Yet Plamen Bratkov is of a different opinion, “I don’t think that the fees will go down. They are good, well thought through rates, for which developers receive more than they would in the West.”

One of the problems facing Bulgarian architects is not so much the pressure from developers looking for savings, but the difficulties with tenders for state projects. The Union of the Architects in Bulgaria protested in February against the preliminary terms of participation in tenders being put forward by governmental institutions that severely restrict studio participation. The latest example concerns the construction of the national sports hall for 14,000 spectators. The State Agency of Youth and Sports requires tenderers to have completed two similar designs in the past. The problem is that there has never been a sports hall of this size built in Bulgaria, which automatically writes off participation by local studios. “Government projects are a chance for many studios, but unfortunately the state behaves like a private investor and chooses partners to coperate  with according to rules only they know,” complains Plamen Bratkov. The list of excessive governmental requirements also includes several-millions in terms of annual income and the long-term employment of architects. According to both Bulgarian trade associations, such a strategy will prevent slightly less experienced studios from developing their companies for many years. ν